Days out and takeaways should become cheaper from today as a new tax cut comes into force across the hospitality sector.
Theatre tickets, amusement parks and even zoos will benefit from a VAT cut as part of a £4.1billion plan to boost tourism and get the public spending again.
Chancellor Rishi Sunak said value added tax will drop from 20% to 5% for six months from Wednesday, with food and non-alcoholic drinks also included.
He said the move will “get the sectors moving and protect jobs” as the Government prepares to close the furlough scheme in October.
The cut will run until January 12, 2021 and will include takeaways and meals out as well as hotel, B&B and campsite stays.
However, it will only apply where businesses decide to pass the discount on.
“These changes are being brought in as an urgent response to the coronavirus pandemic to support businesses severely affected by forced closures and social distancing measures,” a Government spokesman said.
Jane Pendlebury, the CEO of Hospa, the Hospitality Professionals Association, said: “The reduction in VAT is absolutely massive news for the hospitality industry.”
Pub chain Wetherspoons said hot food and non-alcoholic drinks will be slashed as part of the cut, with the chain also set to reduce alcohol prices at hundreds of branches UK-wide.
What’s included in the VAT cut?
Value added tax, or VAT, is the tax you have to pay when you buy goods or services. It’s typically 20%, though a reduced rate of 5% applies to some things like children’s car seats and ethical energy.
From today, the Government will slash VAT on food, drink and even staycations to help kickstart the economy and give struggling businesses a boost.
Small and local pubs, restaurants and attractions will be able to charge less tax, with value added tax dropping from 20% to 5% for six months.
The cut applies to food and non-alcoholic drinks as well as accommodation and admission to attractions across the UK, such as zoos and cinemas.
It will affect the following food purchases:
- Food and non-alcoholic beverages sold for on-premises consumption, for example, in restaurants, cafés and pubs
- Hot takeaway food and hot takeaway non-alcoholic beverages
- Sleeping accommodation in hotels or similar establishments, holiday accommodation, pitch fees for caravans and tents, and associated facilities.
Admissions to the following attractions will also be included in the VAT cut:
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How much will it save me?
“The rate change could mean a range of savings for consumers,” Daniel Lyons, the head of tax policy at accountants Deloitte explains, but this will ultimately depend on whether the retailer chooses to pass the benefit on.
“For a pub meal costing £45 without alcohol, a couple could expect to save £5.62, while a £54.50 one-night stay at a hotel in a family room would see a saving of £6.81,” Lyons explained.
“A family ticket to a theme park or zoo costing £144 could see a saving of nearly £18.”
But these savings will only apply if merchants agree to pass the cut on.
Some hotels, for example, are now operating at a reduced capacity to ensure social distancing, which means they cannot afford to pass the cut on. There is also the cost of the extra cleaning measures and PPE to consider.
David Scott, CEO of The Suffolk Hotel Folk, whose properties include The Swan at Lavenham and The Brudenell in Aldeburgh, promises significant savings for guests. “We will be passing the 15 per cent VAT reduction directly on to our staying and dining guests in the hope it will encourage them to book with us,” he said.
“We will also be looking at participating in the 50 per cent off ‘Eat Out to Help Out’ scheme for people dining at our hotels Monday to Wednesday during August.”